Bill Ackman Thinks Diversification is for the Lazy
Bill Ackman made a speech at the Active/Passive Investor conference in which he referred to those investors who overdiversify as lazy.
“They haven’t done enough research into any of their companies. If they’ve got 200 positions, do you think they know what’s going on at any one of those companies at this moment?
“As a result of overdiversification, their returns get watered down. Diversification covers up ignorance.”
SMA Comment: Overdiversification is probably better than underdiversification for the majority of small investors. Ackman doesn’t seem to realize that most investors don’t have the time or resources to pick stocks like he does. Besides, he’s been touting Target for years and it hasn’t been a particularly good performer. The problem with only having a few positions is there are always potential unseen landmines that can cause a stock to collapse no matter how much due diligence an investor performs. Ackman should read the Intelligent Asset Allocator by William J. Bernstein, because he just made a very unintelligent statement.
Source: Business Insider